Classification of Offenses
- Serious Offense: unsafe or unsound banking practice risking material loss, damage, or undue injury involving manifest partiality, bad faith, or gross negligence.
- Less Serious Offense: major violations of banking laws, regulations, or supervisory directives impacting solvency, liquidity, or profitability but not unsafe practices.
- Minor Offense: procedural violations easily corrected without material financial impact.
Definition of Serious Offense Criteria
- Acts contrary to prudent banking resulting in abnormal financial risk or loss.
- Consideration of impact on capital, assets, management, earnings, and liquidity.
- Specific acts include material losses to institution or stakeholders, injury from gross negligence, or disadvantageous contracts.
Penalty Rates for Asset Size Categories
- Serious offenses attract penalties from P500 to P30,000 depending on asset size.
- Less serious offenses penalties range from P300 to P20,000.
- Minor offenses penalties range from P150 to P10,000.
Penalty Determination Methodology
- Two-step assessment: (1) classify offense nature; (2) evaluate aggravating and mitigating factors.
- Aggravating factors increase penalty, mitigating factors reduce it.
- Penalties imposed without prejudice to non-monetary sanctions.
- Violations with specific penal provisions excluded from this guideline.
Aggravating Factors
- Frequency of violations within a three-year period.
- Duration of violation prior to detection (over one year considered long).
- Continuation of violation after official notification.
- Concealment efforts indicating intent to defraud regulators.
- Magnitude of loss or risk of loss to the bank.
- Impact on bank’s reputation and the broader banking industry.
Mitigating Factors
- Good faith or absence of intent to violate.
- Full cooperation with regulators during investigation.
- Positive remedial actions or reforms undertaken even if not immediate.
- Voluntary disclosure of violations before detection by authorities.
Implementation and Effectivity
- Guidelines approved by the Monetary Board in 2005.
- Effective 15 days after publication in Official Gazette or newspaper of general circulation.
- Penalties supplement powers of the Monetary Board in regulatory enforcement and ensuring sound banking practice.